North Carolina home purchases usually involve two separate deposits, and buyers mix them up all the time. Both are credited toward your purchase at closing, but they work very differently if the deal falls apart.
The due diligence fee
The due diligence fee is paid directly to the seller when the contract becomes effective. It compensates the seller for taking the home off the market while you inspect, appraise and decide. If you terminate during the due diligence period, the seller generally keeps it, except in limited situations such as a seller breach.
The earnest money deposit
Earnest money is a good-faith deposit held in escrow, often by the closing attorney or a brokerage. If you terminate before the due diligence period ends, it is generally refunded. After due diligence ends, it can be at risk if you fail to close for a reason the contract doesn’t allow.
How much should you offer?
There’s no required amount for either. In a competitive situation, a larger due diligence fee can make your offer stand out because it is money the seller keeps if you walk away. Your broker can show you what’s typical for similar homes right now.
The bottom line
- Due diligence fee: paid to the seller, generally non-refundable.
- Earnest money: held in escrow, generally refundable if you terminate during due diligence.
- Both: credited toward your price at closing.
This is general information, not legal advice. Contract forms and rules change, so ask your broker or a real estate attorney about your situation.